Consumer, GDP reports signal slow recovery

Associated Press
Americans' confidence in the economy rose slightly in November, but prospects remain gloomy amid unemployment and tight credit.

WASHINGTON --- The economy is growing modestly, with consumers too wary about spending to invigorate the recovery.


That's the picture that emerged from reports Tuesday on the economy and the confidence of consumers, who power 70 percent of it.

Unemployment and tight credit have sapped shoppers' willingness and ability to spend freely as retailers enter their crucial holiday season, and Americans are expected to grow more cautious about spending next year.

The economy grew at a 2.8 percent rate last quarter. Forecasts for the current quarter are for similarly lackluster growth before a drop-off next year.

The Federal Reserve foresees a gradual recovery, with an elevated unemployment rate over the next several years, according to documents of its meeting earlier this month.

Most Fed policymakers said it could take "five or six years" before the economy and the job market will be consistently healthy.

The Commerce Department's revised estimate of gross domestic product for July through September was less than the 3.5 percent growth rate foreseen just a month ago. The estimate for GDP -- the value of goods and services produced in the United States -- was a tad less than the 2.9 percent growth rate that economists surveyed by Thomson Reuters had expected.

The main factors behind the downgrade: Consumers didn't spend as much, commercial construction weakened, and imports exerted more of a drag on the economy. Businesses also trimmed more of their stockpiles, further restraining growth.

At the same time, the Conference Board's Consumer Confidence Index rose to 49.5 in November from a revised 48.7 in October.

While better than expected, the report shows consumers remain gloomy heading into the holiday season. A reading above 90 means the economy is on solid footing.